Treasury to expand approved persons across industry

The UK Treasury is looking to expand its approved persons regulatory regime across all types of financial services firms as part of wide reform.

In its response to the Parliamentary Commission on Banking Standards' final report, the Treasury said it agreed the approved persons regime, which is the primary means of sanctioning financial services employees over breaches in regulation, should be expanded.

However, while the Commission report recommended that the UK government should press ahead with expanding the current approved persons framework, which it will rename to the senior persons regime, across the banking industry, the Treasury said it would seek to widen the scope of the regulation across the entire financial services industry.

The Commission report advised the regime should be extended to cover all decision-making individuals at banks who could have an impact on the integrity or stability of financial markets, including proprietary trading desks at banks. Expanding the role to financial services as a whole could have even wider ramifications for buy-side firms and other market participants.

Senior persons will also have a reverse burden of proof, meaning where regulatory breaches occur, the senior person will be required to prove they took all reasonable steps possible to prevent it.

Furthermore, regulators will gain the power to take disciplinary action against individuals who are not a senior person if they are knowingly concerned in a breach of regulatory requirements. However, those not covered by senior persons will not be faced with the reverse burden of proof.

A new remuneration code for banks which defers staff payments as a way to mitigate the potential for risky activity by individuals will also implemented for banks. This would impact remuneration for all bank employees whose actions could seriously harm a bank, its reputation or its customers.

Timetables to implement the Commission's recommendations are due to be set out by the government, Financial Conduct Authority, Bank of England and the Prudential Regulation Authority in the autumn, alongside amendments to the Banking Reform Bill.